Madhya Pradesh H.C : the amended provisions of s. 43B were applicable to asst. yr. 1984-85 when the said amendment was effective from 1st April, 1988

High Court Of Madhya Pradesh : Indore Bench

CIT vs. Uttamchand Sahijram & Ors

Section 43B, proviso

Asst. Year 1984-85

A.R. Tiwari & S.B. Sakrikar, JJ.

Misc. Civil Case No. 458 of 1992

24th January, 1996

Counsel Appeared

D.D. Vyas, for the Revenue : M.L. Kothari, for the Assessee


On request, the above noted Misc. Civil Cases, entailing common question of facts and law are heard analogously and are being disposed of by this common order.

2. Right at the threshold it may be stated that Misc. Civil Case No. 458 of 1992 was listed today. On request the other Misc. Civil Cases, as particularised above, were also ordered to be listed today through supplementary cause list for analogous hearing as connected matters. These Misc. Civil Cases are registered on the applications of the CIT, Bhopal presented under s. 256(2) of the IT Act, 1961 and contain the undernoted question, categorised as one of law, for direction to the Tribunal to state the case and refer the same for our opinion :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amended provisions of s. 43B were applicable to asst. yr. 1984-85 when the said amendment was effective from 1st April, 1988 ?”

3. This question of law is sought to be supplemented and supported by the undernoted three common grounds contained in these applications : (i) That the Tribunal erred in law in giving retrospective effect to the amendments effective from 1st April, 1988 in s. 43B of the IT Act by exceeding its jurisdiction in reading more than what the Parliament has expressly provided. (ii) That the taxing statute is passed after great scrutiny and the Tribunal erred in holding that the meaning of the words being dubious it required interpretation and under that tried to grant more retrospectivity to the amended provision than what is prescribed. (iii) That as the question is not finally decided by the Supreme Court, a question of law did arise worth opinion of the Hon’ble Court.

4. Briefly stated, the facts of the case are that the Assessing Officer (AO) made addition of certain amounts in terms of s. 43B of the Act. In appeals, CIT(A) deleted the addition. The Department then filed appeals before the Tribunal. The Tribunal held that the claim was allowable in view of the decision rendered by High Court of Patna in the case of Jamshedpur Motor Accessories Stores vs. Union of India (1991) 91 CTR (Pat) 19 and thus affirmed the orders passed by the CIT(A). Sec. 43B was inserted by the Finance Act, 1983 w.e.f. 1st April, 1984. Proviso to this section was inserted by the Finance Act, 1987 w.e.f. 1st April, 1988. The Tribunal, however, held that the amendment was declaratory in nature and was available for being applied retrospectively. It, therefore, held that the amended provisions of s. 43B were applicable to assessment for the assessment years prior to 1st April, 1988. The decision of the Tribunal had rested on the order passed in ITA No. 1151/Ind/1988 (Mantri Bros. vs. ITO). Aggrieved, the applicant/Revenue filed applications under s. 256(1) of the IT Act. The applications were rejected.

As the Tribunal declined to state the case and refer the question, and held that no referable question was in existence, the applicant filed these cases under s. 256(2) of the Act.

We have heard Shri D.D. Vyas, learned counsel for the applicant-Revenue and counsel for the non-applicant- assessee in some of these cases. Shri Vyas submitted that the question deserves to be answered in favour of the Revenue. On the other hand, the counsel for the non-applicant-assessee argued that there is no question of law for direction of reference.

The core question is whether the amended provisions of s. 43B is retrospective or prospective in operation ? The applicant contends that it is prospective whereas the non-applicants contend that it is retrospective and that benefit is available to the assessees.

Shri Vyas has placed reliance on Sanghi Motors vs. Union of India & Ors. (1991) 91 CTR (Del) 15 : (1991) 187 ITR 703 (Del) : TC 19R.708 in support of his contention.

9. We have read the aforesaid decision. Two features are noticeable : (i) The petition was dismissed in limine. (ii) The several decisions taking contrary view were not before the Bench for consideration because of the same being of later dates.

10. Sec. 43B provides that, notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of any sum, enumerated under sub-ss. (a) to (d), shall be allowed only in computing the income referred to in s. 28 of that previous year in which such sum is actually paid by him. First proviso, inserted w.e.f. 1st April, 1988, contains as under : “Provided that nothing contained in this section shall apply in relation to any sum referred to in cl. (a) or cl. (c) or cl. (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-s. (1) of s. 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return” :

11. The core question is whether Tribunal rightly applied the amended provision of the aforesaid section to the assessment years prior to 1st April, 1988 ? The answer depends on as to whether the amendment is declaratory of pre-existing law or it affected vested rights of the parties ? In case of former, it can be deemed to be retrospective and in case of latter, it has to be construed as prospective. In ITO & Anr. vs. S.K. Habibullah AIR 1962 SC 918 : (1962) 44 ITR 809 (SC), it is held that : “In our view, it was rightly held in Kundan Lal vs. ITO (1959) 37 ITR 337 (Punj) following Kanumarlapudi Lakshminarayan Chetty vs. ITO (1956) 29 ITR 419 (AP) : AIR 1957 AP 159 that cl. (5) of s. 35 of the Indian IT Act, which was enacted by the IT (Amendment) Act, 1953, was not declaratory of pre-existing law, and as it clearly affected vested rights which had accrued to the assessee, must be deemed to have come into force from 1st April, 1952. It had no greater retrospective effect than was expressly granted to it. The power to rectify assessment of a partner consequent upon the assessment of the firm of which he is a partner by including or correcting his share of profit or loss can therefore be exercised only in case of assessment of the firm made on or after 1st April, 1952. The ITO has no jurisdiction under cl. (5) of s. 35 of the Act to rectify the assessment of a partner of a firm consequent upon the assessment or reassessment of the firm disclosing an error made before 1st April, 1952.” Manifestly, first proviso, as extracted above, is declaratory of pre-existing s. 43B, effective from 1st April, 1984 and did not affect vested rights. It is explanatory of the provision and is procedural in nature. That being so, there is no question of ignoring its effect on the linchpin of its introduction at a later date i.e. from 1st April, 1988. The object is to advance the remedy and curb the mischief. The dictionary meaning of the word “provided” is “on condition that” “on this term”. The provision supplies periphery and purpose to the point. It thus explained as to how to read and apply s. 43B. It has nothing to do with the `date’. It variegated and vellicated like `egocentric conception’. Luculently, it controls s. 43B and cannot be treated as “insipid” till 31st March, 1988. In other words cases of assessment years till 1987-88, decided after 1st April, 1988 have to be viewed in the light of proviso.

In New York vs. United States 326 US 572, Mr. Justice Douglas, in a dissenting opinion, expressed thus : “The former obviously is not true. The latter overlooks the fact that the power to tax lightly is the power to taxIn the case on hand, first proviso is intended to `regulate’ the course of permissible deductions. While deciding this point, amended provision has to be kept in focus irrespective of date of its arrival on the statute. This then imparts logical retrospectivity.

In CIT vs. Sri Jagannath Steel Corpn. (1991) 191 ITR 676 (Cal) : TC 19R.725, CIT vs. Polar Fan Industries Ltd. (1992) 197 ITR 718 (Cal) : TC 19R.734, CIT vs. Chandulal Venichand (1994) 118 CTR (Guj) 257 : (1994) 209 ITR 7 (Guj) : TC 19R.748, CIT vs. Vinar Systems Pvt. Ltd. (1993) 203 ITR 756 (Cal) : TC 19R.737 and CIT vs. Edcons (India) Pvt. Ltd. (1992) 198 ITR 86 (Cal) : TC 19R.734, it is held that the aforesaid provision is clarificatory and explanatory in nature and is required to be interpreted to have retrospective effect.

The first proviso is remedial one as the mistake had crept in s. 43B and, therefore, it would have retrospective effect from the date when s. 43B was introduced i.e. from 1st April, 1984. Sec. 43B was introduced to curb the practice of some of the taxpayers who were not discharging the undisputed tax liabilities even though they were getting deductions by maintaining accounts on mercantile basis. This Court had also taken the same view as is taken by the Tribunal in Misc. Civil Case No. 665 of 1992 [CIT vs. Dhiraj Kumar & Co. decided on 3rd Jan., 1996…..] and Misc. Civil Case No. 514 of 1992 CIT vs. Shree Tea Co. [since reported at (1996) 135 CTR (MP) 66] and several connected Misc. Civil Cases decided on 17th Jan., 1996. Nothing substantial is urged to pursuade us to take a different view in the matter.

In our view, the Tribunal took the view sustainable in law. In face of the view we take and in the light of the decisions, cited in paras 14 and 16 above, with which we respectfully agree, Sanghi Bros. case (supra), dismissed in limine, does not tilt the balance in favour of the Revenue. On the other hand, we hold that provision in question, as noted above, is declaratory and explanatory, and, being procedural in content and context, is retrospective like law of limitation.

19. The grounds as noted above are inutile and futile and have no material bearing on the question presented and projected.

20. In Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) : AIR 1977 SC 429, pertaining to IT Act, it is held that : “At the same time, it must be borne in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity.”

21. On bestowal of our anxious consideration, we thus hold that there is no referable question of law as contained in these applications and noted above.

22. Consequently, we dismiss all these Misc. Civil Cases as devoid of merit but with no orders as to costs.

23. Counsel fee is, however, fixed at Rs. 750 for each side in each case, if certified.

24. Retain this order in Misc. Civil Case No. 458 of 1992 and place its copy each in the connected Misc. Civil Cases for ready reference.

[Citation: 220 ITR 517]

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